Thousands of entrepreneurs are being hit with huge increases in business rates because they have done up dilapidated high street properties.

Business rates have weighed heavily on the shoulders of British business. Based on what a property is worth on the rental market, this extra cost has pushed many small businesses into financial distress. Despite pleas for reform and the increasing number of insolvencies that has occurred, as a result, business rates continue to skyrocket. Other than destroying small business confidence and chipping away at the so-called “backbone” of the economy, the success of entrepreneurs is now also being threatened.

Entrepreneurs and their start-up businesses provide the necessary platform for innovative experiments and encourage bolder business concepts. New reports have now revealed how government agencies are now charging higher rates for renovation, penalising companies for improving the rental properties they’re already paying rent for. If business rates continue to disrupt the prosperity of both small businesses and entrepreneurs, it will become increasingly harder for the UK to keep pace with rivals.

How much properties are worth, and therefore the amount of its rates, are calculated by the Valuation Office Agency. The agency takes into account typical rental values and the quality of the property, and of course, the higher the rate, the higher the amount of payable tax. The extra cost directed at the business owner puts brick and mortar shops at a wide disadvantage, giving more flexible online retailers an edge and a wider turnover.

While business rates are inconvenient at best, and terminable at worst, they can be overcome. At the Credit Protection Association, many of our Members are retailers and therefore many have complained of their financial woes on account of damnable business rates.

Our debt recovery services have subsequently recovered residual debt and restored financial confidence. This is complemented by our credit management products, where credit checks and status reports have solidified our Members’ position on the high street, inputting safeguards to ward off late payers and prepare for further business costs.

Kate Nicholls, of trade body UK Hospitality, said: ‘When businesses invest to give communities vital services like pubs, hotels and restaurants they take a huge financial hit as the tax take is hiked. Business rates are nothing short of a tax on success and a disincentive on entrepreneurship.’

In England and Wales, a medium-sized firm usually pays 49.3p in the pound, so a property with a rateable value of £200,000 would be charged £98,600 a year in rates.

As refurbishment tends to lead to higher rates, it is feared that these charges can mean business owners continue to operate within shabby buildings, or even install machinery that would make the premises more attractive, even though this would boost their income and allow them to hire more staff.

Stuart Adams, of the Institute for Fiscal Studies think-tank, said: ‘Business rates are a badly designed tax and they should be reformed.’

A spokesman for the Ministry of Housing, Communities and Local Government said: ‘High streets and small businesses are the backbone of our economy. We want to see them thrive.

‘That’s why we are taking measures to support high streets and reduce the burden of business rates – including introducing over £10billion worth of business rate support by 2023.’

 

Momentum is growing for an overhaul of business rates. Around 50,000 retail jobs have been lost this year as high street stores battle with online retailers that are taking huge amounts of their business.

As Brexit uncertainty looks set to break apart, business rates reform could form part of the country’s economic future. As the UK edges closer towards the post-Brexit landscape, the innovation and bravery of our firms become more important. If businesses are to overcome the damage caused by buisness rates, they must focus on cash flow and set to work on enhancing business finances.

At the Credit Protection Association, we do more than provide our Members with an injection of cash and pay closer attention to the state of our Members’ finances. Our efforts are spent on chasing down unpaid invoices and late payers, as well as conducting credit checks on our Members and their suppliers and customers. Strengthening our Members’ financial position is the priority, and is the best defence against further economic turmoil.

Please call us on 0330 053 9263 to discuss how CPA can help your cashflow.
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Brexit Continues to Hurt Business, Refocusing on Cash Flow Will Help

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